Should I sell my endowment or keep it going?

Q About 10 years ago I took out an endowment to cover an interest-only mortgage when I had to remortgage to buy out my then partner.

Three-and-a-half years ago I moved house and took out a new repayment mortgage with my current partner, who is now my wife.

At the time it seemed a sensible idea to keep the endowment running to act as a kind of long-term saving plan, but I'm really not so sure now.

I've been getting profit warnings for the past couple of years and I'm really not sure what is the best thing to do.

Since I don't need it to pay off a mortgage is there any benefit to keeping it going, or would it be better to cash it in or sell it and use whatever I can get to reduce the amount on our current repayment mortgage?GS

A One benefit to keeping the policy going is that it provides life cover and, depending on the kind of policy you have, should pay out a lump sum which would enable your wife to pay off all (or some) of the mortgage if you died.

Replacing this cover could be expensive because the cost of life insurance increases as you get older. So if life insurance to cover the mortgage is something you need, it might be worth getting a quote from independent life insurance specialist LifeSearch so that you can compare the cost of buying a new policy with the cost of your current endowment.

Even if you don't need life cover, I would still be wary of cashing in or selling the policy as there is a risk you will get back less than you have paid in.

However, if you break even - or get back more than you have paid in - it could indeed be a sensible move to raise cash from the policy and use it to pay off some of your current mortgage. But it's hard to say categorically because it depends a lot on what investment returns and interest rates do in the future.

A compromise would be to make the policy paid up, which means that you stop paying the premiums but have to wait until the end of the policy term for the proceeds to be paid out.

Making the policy paid up is typically a better deal than surrendering, and means you can use the cash you no longer spend on premiums to pay for replacement life cover and/or to pay off more of your mortgage each month (if your lender allows this).